Expert Blames Crypto Crash on Market Maker Liquidity Shock – Not Weak Fundamentals

Lee argues that the sell-off is more likely tied to a liquidity crunch on the balance sheet of a major market-making firm — a scenario that can trigger chain-reaction selling across exchanges.

Not a Demand Problem — A Liquidity Shock

As reported by WuBlockchain, Lee explained that when a large market maker becomes financially stressed, the result is not gradual weakness but sudden, heavy selling. Liquidity dries up, bids disappear, and the price crashes faster than fundamentals would suggest. In his words, aggressive traders tend to “push the wounded player until they drop,” accelerating the decline to force more liquidations.

Bitcoin and Ethereum both continue to face selling pressure, but Lee says neither asset has lost institutional relevance. Instead, he sees the downturn as a short-term episode created by structural damage rather than a shift in sentiment about crypto.

Long-Term View Still Standing

Despite acknowledging that Bitcoin could fall further — potentially retracing as much as half from previous highs before stabilizing — Lee maintains that his long-term thesis hasn’t changed. BitMine continues to accumulate Ethereum, and Lee believes Wall Street’s embrace of the asset will only strengthen over time.

He repeated a message for retail investors: this is not the moment to trade with leverage. Borrowed positions are being liquidated the fastest, wiping out traders who otherwise would not have sold.

Lee previously estimated the market could stabilize six to eight weeks from now, meaning his recovery window still points to post-Thanksgiving.

Washington Eyes Rare Earth Breakthrough With China

Away from crypto, the geopolitical backdrop could shift before year-end. Treasury Secretary Scott Bessent said the United States and China are pushing to complete negotiations over rare earth minerals by Thanksgiving — a deal that would prevent new tariffs and protect access to materials essential for defense, electronics and clean-energy manufacturing.

Bessent highlighted productive communication between President Trump and President Xi and stated that both sides want to avoid renewed escalation in trade restrictions. The arrangement would build on the framework agreed last month, which paused new tariffs on Chinese imports in exchange for China reconsidering export-licensing limits on critical minerals.

The Bigger Picture

Lee’s thesis suggests the crypto market is reacting to temporary liquidity stress rather than a collapsing investment case. Bessent’s optimism on U.S.–China relations adds another dimension: if supply-chain risk eases, risk-on sentiment in global markets — including crypto — could return faster than many expect.

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